WMTA Shares these commentaries, without taking a position unless otherwise noted, to bring information to our readers
To view the archives of the Tax Foundation of Hawaii's commentary click here.
For the Week of May 21, 2017
A Raid by Any Other Name...
By Tom Yamachika, President
We have written before about GEMS (Green Energy Market Securitization), a program adopted by our state government in 2013. The state wanted to facilitate the buildout of “clean energy infrastructure,” a necessary step to reaching its clean energy goals. GEMS was supposed to be a financing program that provides low-cost capital to finance solar photovoltaic systems and other clean energy improvements for those who may otherwise have difficulty obtaining financing for these projects. Low-credit homeowners and renters, as well as nonprofits, are among those who qualify for project financing through GEMS. The “securitization” part refers to how the State was going to get the money to loan out, by borrowing $150 million on the bond market. That debt would be repaid, with interest, by the “Green Energy Infrastructure Fee” which is paid by everyone who gets an electric bill. For residential customers, the fee is around $1.50 per month. It is determined by the Public Utilities Commission (PUC), and the fee amount changes every six months or so. Commercial customers, of course, pay more.
According to a report prepared by DBEDT at the end of 2016, principal and interest on the bonds is approximately $13.4 million per year. Of the $150 million borrowed on the bond market, the cash deployed at the end of March 2017, according to GEMS’ most recent quarterly report, was $2.8 million, meaning that less than 2% of the cash the State borrowed has been deployed. There are also staggering administrative costs, $2.2 million since program inception, that were necessary to set up the program and maintain it to date.
GEMS, as a program, has been a miserable failure, resulting primarily in a large wad of cash that is just sitting in the bank. That’s why our legislature got the bright idea to “use” it to prop up another miserable failure – the “Cool the Schools” initiative.
Under the latter initiative, our legislature appropriated $100 million in 2015 for heat abatement measures to help kids in our sweltering public schools. But between normal procurement efficiency (or lack thereof) and a myriad of special requirements that were tacked on to the bill authorizing the program, contractors were bidding more than $80,000 per classroom. With 7,000 classrooms in need of heat abatement improvements, the $100 million didn’t go very far to solve the problem. So this year our legislature passed a bill, HB 957, authorizing the DOE to borrow $46.4 million from the GEMS program at an interest rate of Z-E-R-O.
Because there are real costs to borrowing money, including the debt service that is now being paid on the $150 million in bonds, it is obvious that the bill forces the GEMS program, and its stakeholders the utility rate payers, to subsidize the DOE. This raises constitutional issues because it is taking a public expense and making it fall exclusively upon utility rate payers, who derive no special benefit from having cooler classrooms.
There may not even be a need to pass the bill. The PUC has already authorized the DOE to borrow up to $60 million for energy efficiency and heat abatement projects in PUC Order 34421. The interest rate approved by the PUC was a fixed rate of 3.50% -- probably better than any loan obtainable commercially, but still arguably fair to GEMS and the utility rate payers.
This is just one of several bills now awaiting action from the fifth floor of the Capitol. We’ll be writing about more of them in the weeks ahead.
Below is an ad Paid for by Friend of Alan Arakawa, for the Maui News. We did our best to make the text legible for you.
Mayor Arakawa will be at the West Maui Taxpayers Association, Breakfast with the Mayor Event. Seats are limited! Click here for more information and RSVP.
Hokama offers alternative to mayor’s budget proposal
April 28, 2015
By MELISSA TANJI - Staff Writer (firstname.lastname@example.org) , The Maui News
WAILUKU - Lower property tax and status quo water rates, along with higher user fees for the Waiehu Municipal Golf Course and Maui Bus, were part of the proposed budget presented by the Maui County Council's Budget and Finance Committee chairman Monday.
Chairman Riki Hokama chose to retain Mayor Alan Arakawa's proposed increases to sewer, trash collection and tipping fees along with hikes to the vehicle fuel and weight taxes.
In his remarks to other councilors in Council Chambers, Hokama noted repeatedly in his remarks that "nothing is free" and that residents could not sustain "double-digit" increases to some taxes, especially property taxes.
(Article Photos) Hokama
Hokama's proposals come as the committee nears the final stretch of its review of the fiscal 2016 budget that takes effect July 1. The proposal has yet to be referred to the full council, which has until June 10 to pass the budget. Failing to act would mean the mayor's budget would take effect, as submitted. Committee meetings are scheduled throughout this week. Public testimony is being accepted.
Hokama's proposed budget is $586 million, or about $114 million less than Arakawa's proposed budget of nearly $700 million. Arakawa's proposed budget is 16 percent higher than this year's council-adopted budget of $604 million. Hokama's proposal for the next fiscal year is $18 million, or 3 percent, less than the current year's budget.
When delivering his proposal, Hokama said that he was decreasing borrowing by $96 million and axing capital improvement projects that have insufficient design work and other problems that make them difficult to move forward.
PROPERTY TAX RATE PROPOSALS
Mayor Alan Arakawa is proposing to keep property tax rates for fiscal year 2016 the same as the current year. Maui County Council Budget and Finance Committee Chairman Riki Hokama is seeking a 3.5 to 4 percent decrease in all tax categories because valuations have climbed 13.5 percent. The proposed rates are per $1,000 of net taxable assessed value.
HIGHLIGHTS TO HOKAMA'S PROPOSAL
Maui County Council Budget and Finance Committee Chairman Riki Hokama offered his proposal for the 2016 fiscal year budget that begins July 1. The plan includes:
* $1.2 million for the continued defense against the coqui frog.
* Adding $7.5 million to a request by Mayor Alan Arakawa for a new municipal parking lot in Wailuku.
* $9.6 million for source, transmission and storage to help reduce the Upcountry waiting list for water meters.
* Adding expansion positions and funding for new operations and equipment for Real Property Tax functions; proposal could generate $5 million in additional revenue.
* More flexibility with Waiehu Golf Course rates to be more competitive with private courses and to make the course self-sustaining.
He also is decreasing the county workforce through attrition and would consider shifting vacant positions before adding new ones.
The cost to county residents by doing "nothing" and allowing Arakawa's proposed budget to take effect is "too high," Hokama said. He questioned Arakawa's $700 million "burden" on the "people we were elected to serve."
"Residents spend within their means (and don't) create a wish list and extract payment from their neighbors," Hokama said, alluding to Arakawa's proposed rate and fee increases and large and long-term projects.
Although Arakawa is proposing to keep property tax rates the same, valuations are up 13.5 percent. Hokama said that even if current rates are maintained, it will result in a "significant increase in real property tax" payments by property owners.
Hokama is proposing a 3.5 to 4 percent overall decrease in rates. Still, he said, his proposal means property owners would be paying more and generating 5 percent more in property tax revenues for the county.
Under Hokama's proposal, the county would net $254 million in property taxes, a $16 million increase over the current fiscal year. Under Arakawa's proposal, the county would net $263 million.
Water rates, including those for agriculture, would remain the same along with water meter service charges. Hokama proposes no fee increase for new water meters. Comparatively, Arakawa proposed a 2.5 percent hike for water service fees, which include bills for water usage. He also sought to more than double the current water service development fee for a standard 5/8th-inch residential meter from $6,030 to $14,060.
Arakawa has long sought the increases to pay for water improvement projects that he said the county should be doing now to save on repair costs in the future.
Instead of increasing water rates and fees for residents, Hokama is seeking to appropriate nearly $10 million for source, transmission and storage development for the water department and to assist with the reduction in the Upcountry water meter wait list.
Hokama has proposed keeping some of Arakawa's other proposed fee and rate increases. Fire, police and ocean safety department operations; road repairs; and running the bus system cost money, he said, repeating his "nothing is free" mantra.
Hokama said rates and fees are proposed to "ensure services for residents are sustainable in the near futures to come."
Areas where Hokama aligns with with Arakawa include:
* 5 percent increase to sewer fees to assist with developing a needed sewage treatment plant.
* $4 increase to trash collection fees per month for Maui and Molokai; $2 increase per month for Lanai.
* Commercial tipping fee increase from $65.60 to $80 per ton.
* 2 cent per gallon increase in the county fuel tax, from 16 cents to 18 cents.
* Vehicle weight tax increase from $0.0275 to $0.03 per pound of net weight for passenger vehicles, trucks and noncommercial vehicles not exceeding 6,500 pounds.
Hokama also is proposing a $1 increase to all daily pass routes for the Maui Bus and raising general monthly passes for all categories, including senior citizens and disability bus fares, from $45 to $60 for all routes.
Waiehu Golf Course fees also would be tinkered with in Hokama's plan, with some rates increasing and others decreasing. There also would be new twilight and 9-hole rates.
Fees also would increase from $2 to $12 for camping permits, and the commercial bike tour permit annual fee would go from $100 to $250.
The capital improvement projects Hokama nixed included nearly $30 million in construction funds for the Kalana O Maui Campus expansion; $2.9 million for the county Waikapu Baseyard; $2 million for upgrades, including a new gym and other facilities, for the War Memorial Complex; and $4 million for the South Maui gymnasium.
The budget committee chairman also proposed reducing the mayor's requests for funding of equipment, premium pay and operations in many departments. Hokama is leaving the personnel count the same as the current fiscal year.
Hokama said spending on nonprofits would remain level for next year compared to this year's budget.
* Melissa Tanji can be reached at email@example.com.
SAVE THE DATE!
Wednesday, April 29/2015, 6 pm
Council Chambers, Wailuku
A public hearing on real property tax rates is scheduled Wednesday at 6 p.m. in the Council Chamber.
Tax rates for the upcoming fiscal year will be set by the council in the fiscal year 2016 budget, currently under review by the Budget and Finance Committee. Council members will consider testimony from the public hearing as the committee holds decision-making meetings on the budget throughout this week.
By MIKE WHITE, for The Maui News
A public hearing by the Maui County Council is scheduled for Wednesday at 6 p.m. regarding real property tax rates for fiscal year 2016, which begins July 1, 2015.
If you are unable to join us at the Council Chambers, tune in to Akaku Maui Community Media on Channel 53.
Real property tax is the county’s largest source of revenue. Current rates per $1,000 of net taxable assessed property value for each class of property are:
See Press Release: http://mauicounty.us/budget-finance/county-council-considers-tax-rates-audit-reports/ for more information and proposed rates.
See Here for detailed information on meeting: http://mauicounty.us/meeting/public-hearing-real-property-tax/
Save the Date
January 9, 2018
West Maui Senior Center
788 Pauoa St, Lahaina
Click here for more info
January 17, 2018
West Maui Senior Center
Disaster Preparedness Expo 2016 was a success!
Click here to view all the presentations
Click here for Posts regarding Expo.